Trading places

Mid-market firms using international supply chains have faced significant disruption and headwinds as a consequence of the war in Ukraine, the long tail of COVID disruption, and wider geo-political tensions. However, despite ongoing economic uncertainty, many international business leaders continue to see international trade, and particularly exports, as a key driver for growth. According to data from the IBR, Grant Thornton’s global survey of mid-market companies, 45% of mid-market firms expect to increase their volume of exports over the course of 2023. This represents a slight increase from the first half of 2022 (+1%), and continues the trend that expectations have been rebounding strongly from the lows of the pandemic. 

Percentage expecting a rise in global exports

Grant Thornton’s latest research shows how many businesses are innovating and adapting by reshaping their international supply chains, as they look to reduce risk, embrace opportunity and deliver value. Businesses have taken a variety of steps [i] to increase resilience, from building inventory, to diversifying their suppliers, to setting up local manufacturing hubs and ‘friend-shoring’ – striking deals in sympathetic countries that are more politically palatable to shareholders and customers.

Firms that develop a sound understanding of their risk environment and plan ahead, will create sustainable value in their supply chains and be well positioned for growth as economic conditions improve and trade picks up from the current levels.[ii]

Scenario planning for success  

In the second half of 2022, mid-market firms saw a slight decrease in the ratio of their employees who were focussed on non-domestic markets. These figures were skewed by a major fall in the oil and gas industry, but not reflected across all sectors and regions. In Latin America and Africa the ratio of mid-market firms’ employees focussed on non-domestic markets increased. The top three markets to benefit are China, Germany and the USA, which are primed to increase supply from external markets. In China 26% (up from 25%) of companies report an increase in this activity over 2023. Meanwhile China’s latest export figures show a near 15% jump in this activity, defying expectations, with some analysts having predicted a contraction of 7%. 

Top destinations for global trade

“Business leaders must plan for the long term. They need to think about where they export, where they import, should they reshore or should they not reshore, and how can they create competitive advantage and differentiate themselves in the market in such a way that they do it profitably.” - Jonathan Eaton, Principal, Grant Thornton US

Global events have made it a tough time for trade. The outlook from the WTO and others was that trade would slow in 2023, with rising interest rates and financial instability adding to geopolitical tensions. In April, the WTO expected export volumes to grow by just 1.7% this year,[iv] well below the average level for the past decade of 2.6%. Firms that plan ahead and are prepared to innovate will be able to make the most of their exports, helping them to stay one step ahead of the competition, despite current economic headwinds and a number of threats on the horizon.